BWB - There seems to be lot of Buzz around

I analysed two short term trades to play the overall bearish market sentiment. If I am wrong, I recover my commission, if I am right, I make points.

Trade 1:



Trade 2:


Comments welcome.
Trader R

Learning New Strategy

I am experimenting with a new strategy which seems promising. I am going to put up a few paper trades over the course of next 2 weeks and see how they perform. Here is the first one:

Is this a bullish or a bearish trade???

One of the questions I have on this strategy is that the spread seems too high. Not sure at what price can I enter such trades.

Those with Optionetics Platinum can track the trade here.

Here is an article

TraderR

New Potential Credit Spread

GM:
Bounced from 50D MA with large candles. I am consedering a Bull Put Spread on this trade.
Sell 27.5P
Buy 25.0P for $80 credit
Money Stop: Loss of $80 (correspond to Tech Stop of $25.8)

FCX
Bounced 200D MA with large candle and more than average volume.
Sell 55P
Buy 50P for $165 credit
Money Stop: $80 which corresponds to technical stop
Technical Stop: $52.50

Update 1

My SNDK fly was wrong in direction. So I took paper loss and moved on
My GOOG fly is still in the market. The fact that GOOG has not gone back to previous highs may turn out to be good for me as I want this increase to happen around September.

How to trade earnings using Fly?

Hi,
In this post, I am attempting to use a butterfly to trade earnings. Stock I am using is SNDK.
The earnings expectation has shot up the IV of the options. Earnings on 20 April.
Fly benefits from a IV crush.
However, a high IV implies that traders are expecting a big move in stock. So ATM fly is ruled out.
How about a directional fly? Sounds like a good idea.
But, for fly to make money, you need to be right on direction, expected price and time.
In this case, I am willing to bet as follows:
Direction: Up
Expected Price: Previous major resistance
Time: Around earnings
To back up my 'prediction' I will have to risk money.. so there you go:



I am willing to risk $40 per contract to test my prediction. If I am right, $$$$$$, but what if I am WRONG?

Who cares... I manage that question by making sure my max loss is small.

Happy Trading
Trader R

My GOOG Fly

Hi
I wanted to post my Google fly I put on almost 2 months back. On ToS platform it is showing me a profit while on Platinum it is showing a large loss. Obviously the large loss is wrong as I cant loose more than my debit of $10 per trade :-)

I am toying with a new idea - Double Cal

Hello Traders:
I was reading the Option Trader Mag, a free monthly e-magazine where they were talking about Double Spreads. I thought why not try one (on Paper).
So here you go: One on SPY




This is essentially 2 calendars (May - June 128 put and 130 call).
Max risk is $135
Max reward $123
However, BE and max reward are sensetive to IV.
The vega of this trade is $9.79.
I did some IV stress test on this trade. It is sensetive. I am putting it on my blog to track it and see how it looks.

Here is one tip: Do call & put calendar just OTM and not a few strikes OTM.
I believe the DC trade works better if strikes are closer together.

I will write more about is later.
Trader R

PS:
(Note: I have directly copied the picture above from Platinum. Here is how:
Right click on the chart & select copy image location
Paste the location in place of ccc in following command:
< i mg src="ccc"/>
Just make sure there are no space between <,i and mg

I closed my 2 credit spreads

I closed both spreads at 60c profit...
:)

My Second Trade (contd)

SHLD was my second trade entered on 16 March
The stock gapped up on good earning. I could get a reasonable credit of $70 on this by selling 125P. Here are a few charts explaining the trade. My technical stop is $126 which is the high of the gap.


Again, here is the economics of the trade:
Credit received: $70
Max Risk: $430
Max Reward: 16%
No of days: 33
This is not an ideal credit spread if I use my 1% per day rule. But this spread is almost $10 OTM and hence carries a higher probablity of success.



Happy Trading
Trader R

My 2 New Credit Spreads & How I found Them!!!

Hi,
Its been a while since I updated my trades. I recently entered into two Bull Put Spreads. One on GS and other on SHLD. Both stocks gapped up on good earnings.

Interestingly, I was looking at 'Insight' tab in Think or Swim platform where I found the trades in real time. Here is an example of what Insight tab is all about. (I am having trouble with uploading image...)


My Trades: 1) GS:
The stock gapped up on 14 March and IV shot further up. The IV is expected to go down over time as the uncertainity is over...
I had 2 choices:
Choice 1:
Sell 140 Put to open a credit spread for $70. This meant a max return of 16%.
However, 140 price point was $5 below Open price. So the chances of keeping the $70 was very high.




Choice 2
Sell 145 Put for a credit of $140 or so. This trade was valid only on 15th March had we broken the high of 14th March. This happened on Friday. I havent analysed it and I dont want to put more money on this stock... However this is how it would have looked on 14th:


Happy Trading!
Trader R

I was assigned yesterday!

This is the first time I was assigned. I was in a cheap calendar on BAC. It was a ITM Put calendar put on for $0.05.
On Friday I saw that the short put (March) had no premium left and was debating whether I should close the position and take a loss of $5/contract or see if the stock will move up (in my direction) on Monday (I wouldnt say Greed here... but something similar... maybe wanting to be right.)
Since the max loss was only $5/C, I took the risk. I had 7 contracts.
On Monday morning, I had 700 shares in my account with stock $2.5 OTM. My long put had about $0.05 of time value. I had the following options:
1) Sell the Put and Sell the shares
2) Exercise the Puts

I was not sure and I wanted to be out of this position. So I spoke with the TOS helpdesk. The person waled me thru the analysis and we concluded that exercising my put was the best bet.
So thats what I did!

If I would have closed the trade on Friday, I would have incurred a loss of $35 + 6 (commissions) = $41
As I had to exercise, my loss was $35 + $3 (commission for buying calendar) +$15 (commission for exercising) = $53.... I lost 30% more because I didnt follow the rules!

Trader R

My Iron Condor

SPY Iron Condor
Here is the Option Trade for this month.
Analysis of SPY:
It broke above 50 day MA
100 day MA could act as support. This is also in general vicinity of chart support
The TAPP target per AGET is 131.85 by end March
Looking at following IC
125/132 IC for credit of $25.
Max risk = $75
Max Profit (Less commission) = $25-(4 * 1.5+2*1.5) = $16
Max Return: 21.33%

SPX IC
Similar Analysis
I am looking at 125/131 IC
BE: 124.65 (just above 100d MA) and 131.34 (2% above CMP)
Note that previous high at 1294.9 could be a resistance
Max Risk: $65
Max Profit: $35 (less commsission $9) = $26
% Return: 26/65=40%

What if the bull run continues:
I will exit the Bear Call Spread portion when the stock trades twice above 131.2 to atleast cover my commission.

Trader R

Trade to make money!!!